Superannuation is one of the best things about Australia’s retirement system. Both capital gains and passive income are taxed at a lower rate within superannuation compared to outside of superannuation for a full-time worker.

Tax changes announced earlier this year have made non-superannuation investments less attractive – capital gains are going to be taxed more, negative gearing’s appeal is being reduced, and trust distributions are under the spotlight.

With the lower tax rate during the accumulation phase and potentially a 0% tax rate in the retirement phase of superannuation (depending on the balance), it’s a very effective investment vehicle for people saving towards retirement and in retirement too.

Tax makes a big difference for passive income because it’s the after-tax income figure that investors can use.

Every household has a different tax position, so I’m not going to refer to tax for the rest of this article. Let’s talk about dividend yields.

The power of a dividend yield

Every investment that pays dividends comes with a dividend yield.

A dividend yield tells us how much passive income an investment pays.

The dividend yield is influenced by two factors.

First, there’s the dividend payout ratio – how much of a business’ profit is paid out as a dividend. Obviously, the more they pay out, the bigger the dividend yield.

The other factor is the valuation of the investment, which can often be measured by the price-earnings ratio (P/E) ratio. The more expensive an investment goes, the lower the dividend yield.

Investors can then look at the different dividend yields and decide what investments to choose. Higher dividend yields aren’t necessarily better, but they do mean an investor can receive more passive income for the same portfolio balance.

For example, someone with a $200,000 investment balance at a 3% dividend yield would have $6,000 in annual passive income. If that same person were invested in investments with a 5% dividend yield, it would be $10,000 of annual passive income. That’s 66% more income!

Generate $10,000 of monthly passive income from superannuation

To target $10,000 per month of income, we’re talking about an annual goal of $120,000. That’s a big goal, and would certainly unlock a pleasing retirement for whoever is receiving that level of money.

Targeting $120,000 of annual passive income would require a sizeable portfolio. The actual size depends on the dividend yield.

If the dividend yield was 3%, it would require a portfolio worth $4 million.

If the dividend yield was 5%, it would require a portfolio worth $2.4 million.

If the dividend yield was 7%, it would require a portfolio worth $1.71 million.

If I were looking to invest for a 3% dividend yield, I’d think about ideas like Washington H. Soul Pattinson and Co Ltd (ASX: SOL), Wesfarmers Ltd (ASX: WES), Lovisa Holdings Ltd (ASX: LOV), and Vanguard Australian Shares Index ETF (ASX: VAS).

Investments with a dividend yield of around 5% that I’m a fan of include L1 Long Short Fund Ltd (ASX: LSF), APA Group (ASX: APA), and Coles Group Ltd (ASX: COL).

Finally, potential investments with a 7% dividend yield I’d consider for high dividend yields in superannuation include MFF Capital Investments Ltd (ASX: MFF), WCM Global Growth Ltd (ASX: WQG), Future Generation Global Ltd (ASX: FGG), Telstra Group Ltd (ASX: TLS), and Medibank Private Ltd (ASX: MPL).

Overall, there are some great investments to consider, and I’ve filled my portfolio with a mix of the above ASX shares, each with different dividend yields.

The post How much is needed in superannuation to target a $10,000 monthly passive income? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Future Generation Global, L1 Long Short Fund, Mff Capital Investments, Washington H. Soul Pattinson and Company Limited, and Wcm Global Growth. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Lovisa, Washington H. Soul Pattinson and Company Limited, and Wesfarmers. The Motley Fool Australia has positions in and has recommended Apa Group, Mff Capital Investments, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Lovisa and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The S&P/ASX 200 Index (ASX: XJO) kicked off the trading week on a sunny note this Monday, recording a healthy rise that pushed up the value of many ASX shares.

After a bumpy week last week, investors seemed to come back from the weekend with a bit of pep in their steps. The ASX 200 stayed in green territory all session, and ended up closing 0.17% higher today. That leaves the index at 8,679.7 points.

This happy start to the week for the Australian markets followed an even bubblier close to the American trading week on Friday night (our time).

The Dow Jones Industrial Average Index (DJX: .DJI) put on a heck of a show, gaining 0.93%.

The tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) wasn’t quite as euphoric, but still managed a 0.48% rise.

But let’s return to this week and our local markets now for a closer look at what was happening amongst the different ASX sectors this Monday.

Winners and losers

Despite the broader market’s lift, there were still a few corners of the market that went backwards today.

Leading those losers were gold shares. The All Ordinaries Gold Index (ASX: XGD) was hit hard today, plunging 1.57%.

Broader mining stocks weren’t much better, with the S&P/ASX 200 Materials Index (ASX: XMJ) tanking by 1.34%.

Tech shares were also unlucky. The S&P/ASX 200 Information Technology Index (ASX: XIJ) saw its value cut by 0.74% today.

Energy stocks weren’t finding buyers either, illustrated by the S&P/ASX 200 Energy Index (ASX: XEJ)’s 0.22% dip.

Industrial shares didn’t find much love. The S&P/ASX 200 Industrials Index (ASX: XNJ) slid 0.19% lower this session.

We could say something similar for consumer discretionary stocks, with the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) slipping 0.02%.

That’s it for the losers, though.

Turning to the green sectors now, it was healthcare shares that played the starring role today. The S&P/ASX 200 Healthcare Index (ASX: XHJ) saw a 1.49% surge this Monday.

Utilities stocks ran hot as well, as you can see by the S&P/ASX 200 Utilities Index (ASX: XUJ)’s 1.17% jump.

Financial shares were also in demand. The S&P/ASX 200 Financials Index (ASX: XFJ) had roared 1.16% higher by the closing bell.

Consumer staples stocks didn’t miss out, with the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) vaulting up 0.83%.

Real estate investment trusts (REITs) saw some comfortable gains, too. The S&P/ASX 200 A-REIT Index (ASX: XPJ) added 0.57% to its tally.

Finally, communications shares slid home unscathed, evident by the S&P/ASX 200 Communication Services Index (ASX: XTJ)’s 0.32% bump.

Top 10 ASX 200 shares countdown

Our top stock this Monday was gold miner Northern Star Resources Ltd (ASX: NST). Northern Star shares soared 56.15% higher this session to finish at $23.47 each.

This came after news that the company was approached for a takeover.

Here’s the rest of today’s best:

ASX-listed company	Share price	Price change
Northern Star Resources Ltd (ASX: NST)	$23.47	6.15%
Ingenia Communities Group (ASX: INA)	$4.76	5.78%
CSL Ltd (ASX: CSL)	$181.91	2.80%
Suncorp Group Ltd (ASX: SUN)	$19.06	2.69%
Macquarie Group Ltd (ASX: MQG)	$244.98	2.28%
Super Retail Group Ltd (ASX: SUL)	$12.62	2.27%
Reece Ltd (ASX: REH)	$16.59	2.16%
Mirvac Group (ASX: MGR)	$1.75	2.04%
Cochlear Ltd (ASX: COH)	$145.13	1.99%
Insurance Australia Group Ltd (ASX: IAG)	$7.98	1.79%

Our top 10 shares countdown is a recurring end-of-day summary that shows which companies made big moves on the day. Check in at Fool.com.au after the weekday market closes to see which stocks make the countdown.

The post Here are the top 10 ASX 200 shares today appeared first on The Motley Fool Australia.

More reading

• ASX 200 rallies from June lows. Is the worst over?
• 3 cheap ASX shares I would buy now
• Northern Star shares on watch after major takeover approach rejected
• Ingenia Communities receives further revised $5.25 takeover proposal
• Northern Star Resources rejects $38.7bn Gold Fields takeover offer

Motley Fool contributor Sebastian Bowen has positions in CSL. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended CSL, Cochlear, Macquarie Group, and Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended CSL, Cochlear, and Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX investors who are used to owning exchange-traded funds (ETFs) that track Australian shares are probably used to receiving a hefty stream of dividend income as a byproduct.

Most ASX ETFs, including the popular market-wide index funds like the Vanguard Australian Shares Index ETF (ASX: VAS), routinely offer dividend yields between 3% and 5%. It’s sometimes more, and occasionally less, depending on investing conditions. But long story short, Australian-focused ETFs are usually generous income investments.

It is a wildly different story when it comes to US-centred funds, though.

Just this morning, my Fool colleague Bronwyn covered the latest payout from the popular iShares S&P 500 ETF (ASX: IVV). It is estimated that owners of this ASX ETF, which covers the S&P 500 Index (SP: .INX) over in the ‘States, will receive a quarterly dividend distribution of 17.35 cents per unit next month.

Together with July’s payout of 23.3 cents, April’s 13.95 cents, and January’s 20.14 cents, IVV units are set to sport an annual dividend distribution total of 74.74 cents per unit.

That would give the iShares S&P 500 ETF a rough dividend distribution yield of about 1.02% at current pricing.

The BetaShares Nasdaq 100 ETF (ASX: NDQ) is slightly more impressive with a current trailing yield of 1.43%.

Why do ASX ETFs pay higher dividends?

Unless you are looking at a US-based ETF that specifically targets delivering high levels of dividend income, chances are you won’t be able to secure an investment with a dividend yield above 2% in current circumstances. That contrasts notably with ASX ETFs.

But why? If the US houses many of the world’s highest-calibre companies, which it arguably does, where is the dividend income?

Well, the answer is a complex one. In my view, it comes down to a mix of structural and taxational differences between the United States and Australia.

Let’s go through them.

The US markets are structured in a very different manner from the ASX. Here in Australia, the top echelons of our market are dominated by banks and resources stocks. These companies tend to pay out a relatively high proportion of their earnings as dividends. As ASX index funds must hold more of these stocks than any other, they inherit this high-yield nature.

US funds, franking and returns

In contrast, the US markets are spearheaded by tech giants, companies like Apple, Alphabet, NVIDIA, and Microsoft. Whilst enormously profitable, these companies tend to retain most of their earnings for reinvestment, rather than passing them onto shareholders as dividends.

When it comes to tax, ASX companies are incentivised to pay out a dividend to shareholders thanks to our unique system of franking. Franking is intended to prevent double taxation of dividend cash, but is highly advantageous for investors. Particularly those on high incomes. As such, ASX companies tend to start paying their shareholders dividends as soon as they are able to do so. However, in the US, tax treatment of dividends is far less generous. As such, those companies have more of an incentive to retain their cash for reinvestment.

This combination is why US-based ETFs tend to provide less income than their ASX counterparts. Investors shouldn’t mind, though. US-based index funds have delivered far better overall returns over the past decade or two than their ASX counterparts. Only time will tell if that paradigm holds up going forward. But sometimes, a higher dividend yield doesn’t mean a better investment.

The post Own US ETFs like IVV or NDQ? Here’s why your dividends are so low appeared first on The Motley Fool Australia.

More reading

• Invested in ASX IVV or other iShares ETFs? Here’s your next dividend
• 10 top ASX ETFs to watch in 2027
• How many VAS ETF shares do I need to buy for $10,000 per year of passive income?
• Own VAS, VHY, VGS, or other Vanguard ETFs? Here’s your next dividend
• Want to invest in AI? Here are the best ASX ETFs for 2027

Motley Fool contributor Sebastian Bowen has positions in Alphabet, Apple, Microsoft, and Vanguard Australian Shares Index ETF. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, BetaShares Nasdaq 100 ETF, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended Alphabet, Apple, Microsoft, Nvidia, and iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.